IDFC to wind up project development business

Infrastructure Development Finance Corporation Ltd (IDFC), is set to wind up IDFC Projects, its projects development business. The business, into which the company had forayed in 2007, had recorded losses.

Currently, the subsidiary company accounts for two projects — a Rs 5,000-crore power project in Chhattisgarh and a Rs 1,000-crore road project in Gujarat. IDFC Projects owns 74 per cent stake in both the projects and the company's total exposure in these projects is estimated at over Rs 400 crore.

According to company sources, IDFC Projects would not make any fresh investments and would exit the projects step by step, by diluting stakes and booking profits. However, the fate of IDFC Projects after the exits is not yet clear.

“Strategically, we don't want to grow the IDFC Projects business anymore. We would be focusing on our core business, which is basically providing infrastructure finance,” a senior IDFC official told Business Standard. “For the existing projects, we would look to exit by booking profits or finding partners with more relevant expertise and let them run the show.”

IDFC Projects, which started operations in 2009, was set up in 2007 to develop, implement, own and operate infrastructure projects. During 2009-10 and 2010-11, the company incurred losses of Rs 8.81 crore and Rs 7.2 crore, respectively. Losses carried to the balance sheet stood a little over Rs 25 crore at the end March. In 2009-10, it won the bid to set up a 1,050-Mw coal-fired power plant for Dheeru Powergen Private Limited (DPPL) in Korba district, Chhattisgarh. DPPL is a joint venture between IDFC Projects Limited and Ranhill Dheeru Malaysia.

According to sources, IDFC may opt for an open tender to sell the power project at a good return on its investment. IDFC Projects had bought 74 per cent stake in the company for Rs 147 crore, while Malaysian construction company Ranhill Berhad owns the remaining stake. For the 127-km road project in Gujarat, it formed a joint venture with Malaysia-based PLUS Expressway Berhad.

“We have identified infrastructure finance, asset management and private equity business as our core business, and we would like to concentrate on them for the time being,” said a senior IDFC official. Apart from IDFC Projects Ltd, other IDFC subsidiaries include IDFC Private Equity, IDFC Project Equity, IDFC Securities and IDFC Asset Management Company.

In December 2010, IDFC sold 25 per cent equity stake in IDFC Asset Management Company to France’s Natixis Global Asset Management. However, the deal is yet to secure the final approval from regulators.

As on March 31 2011, IDFC’s balance sheet stood at Rs 47,554 crore, a rise of 42 per cent from Rs 33,562 crore a year ago.